Behavioral Biases Never Walk Alone
Isabel Abinzano (),
Luis Muga and
Journal of Sports Economics, 2017, vol. 18, issue 2, 99-125
This article presents evidence of the impact of overconfidence bias in asset prices drawn from a study based on data from tennis betting exchanges. A series of betting strategies in tournaments with a clear-cut favorite are shown to yield significant economic returns. The impact of overconfidence bias on betting odds increases with trading volume, media coverage, and levels of disagreement between overconfident and cumulative prospect theory bettors. Just as in traditional financial markets, arbitrage limits are shown to be a necessary condition for the impact of behavioral biases on prices.
Keywords: overconfidence; betting exchanges; anomalies; behavioral finance; arbitrage (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jospec:v:18:y:2017:i:2:p:99-125
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